Australian economic growth remained weak in early 2024 following a material slowdown last year. Real GDP growth was weaker than expected at 0.1% in the March quarter (vs 0.2% forecast), down from an upwardly revised 0.3% pace in the final quarter of 2023. Year-ended growth moderated from 1.6% to 1.1%, now tracking below the RBA's forecast trajectory. Excluding the Covid period, this was Australia's slowest annual growth rate since 1992 - but from a global perspective, this was a mid-table performance.
Australian domestic demand slowed further expanding by just 0.2% quarter-on-quarter - its softest outturn excluding the pandemic lockdowns since early 2019 - though year-ended growth is still a respectable 2.3%. Within domestic demand, household consumption (0.4%q/q, 1.3%Y/Y) was the main driver of growth - a surprising outcome given cost-of-living pressures and higher interest rates.
While still tepid, the March quarter outcome and earlier revisions paint a picture of household consumption being more resilient than previously estimated. An improving dynamic around real incomes (due to inflation slowing); a reduction in saving (household saving ratio decline from 1.6% to 0.9%); and some one-off factors appear to have boosted household consumption; notably, services spending accelerated by 1.1%q/q - its fastest rise since Q4 2022 - as overseas travel picked up and major events (Taylor Swift tour, Australian Open) were strongly attended.
Across the other components in Q1, business investment (-0.7%) saw its first decline since Q3 2021, driven by weakness in non-residential construction (-4%). Dwelling investment remained weak (-0.5%) with alterations continuing to unwind while supply constraints and higher interest rates are weighing on new home building. Public demand (0.6%) lifted on medical services spending and government support measures for the cost of living. Meanwhile, a rebuilding of inventories added strongly to quarterly growth (+0.7ppt); however, that was offset by a large deduction from net exports (-0.9ppt).
More to come.
